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The Relationship Between Common Ownership and Competitive Conditions of Corporations: Evidence from the Iranian Stock Market

Hosseini, Kowsar | 2022

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  1. Type of Document: M.Sc. Thesis
  2. Language: Farsi
  3. Document No: 55632 (44)
  4. University: Sharif University of Technology
  5. Department: Management and Economics
  6. Advisor(s): Ebrahimnejad, Ali
  7. Abstract:
  8. The impact of ownership concentration on competitive conditions and profitability of industries has been studied and analyzed for decades. By using the Herfindahl-Hirschman concentration index, a range for the level of concentration in the industry has been determined, and some countries implement anti-trust laws based on this range. The new literature that has been discussed recently is the concentration of the market directly and through the common ownership of corporations by large shareholders. In the sense that two or more apparently independent companies may have a common owner who practically regulates their behavior as a company. The structure of ownership in Iran is complex and nested, and the creation of a large gap between the cash flow right and the voting right due to the creation of long chains of ownership and pyramidal structures will ultimately lead to the aggravation of representation problems between large and minority shareholders. According to the statistics collected in this research, the phenomenon of common ownership is also observed in many Iranian industries. Therefore, it is expected that the existence of common ownership in the pyramidal and multi-layered structures of Iranian companies will have a visible effect on the profitability of the companies and their competitive conditions.The current research seeks to investigate the relationship between common ownership and the profitability of companies and examines this relationship by considering three ownership thresholds of 15%, 20%, and 40%. The examined sample includes 288 companies admitted to the Iranian stock market from 1388 to 1398. The test of the research hypotheses using the panel regression method with time and firm fixed effects and error term clustering showed that common ownership at the ownership thresholds of 15% and 20% has no significant relationship with profitability ratios, while at the threshold of 40% ownership, the common ownership index will have a positive and significant relationship with profitability ratios. Finally, when the industry effects are entered into the regression model, depending on which industry a company operates in, in all three ownership thresholds, the presence of common ownership in that company will have a significant effect on the company's profitability ratios. In most industries, this effect was positive and significant, and it was shown that the intensity of the effect of common ownership on profitability ratios in the cement industry is greater than in other industries.
  9. Keywords:
  10. Competition ; Profit Ability ; Pyramidal Shareholding ; Common Ownership ; Competitive Market ; Herfindahl Index ; Stock Market

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